The United States Mortgage Co. v. Gross

• Decision Date: 30 September 1879
• Citation: 93 Ill. 483,1879 WL 8639
• Parties: THE UNITED STATES MORTGAGE COMPANYv.J. GROSS et al.
• Court: Illinois Supreme Court

93 Ill. 483

1879 WL 8639 (Ill.)

THE UNITED STATES MORTGAGE COMPANY

v.J. GROSS et al.

Supreme Court of Illinois.

September Term, 1879.

OPINION TEXT STARTS HERE

APPEAL from the Superior Court of Cook county.

Benjamin Lombard, being the owner of lot 13 and the south half of lot 12, in block 139, School Section addition to the city of Chicago, on August 22, 1872, executed a mortgage thereon to the United States Mortgage Company, a corporation created by a law of the State of New York, and whose place of business was in the city of New York, to secure the payment, in gold coin, of $50,000, in five years, at nine per centum interest per annum, which was duly recorded. The mortgage contained a clause, inserted after the habendum and warranty clauses, as follows:

“It is understood and agreed that this mortgage is to be subject to the right of the city to take so much of said lots as shall be necessary for the opening of and extension of Dearborn street, being 36 feet, more or less, off the west end of said premises, in which event any benefit which may accrue to the said party of the first part herein, may be paid by the city to the said party of the first part direct.”

It was covenanted in and by this mortgage that the grantor should pay the interest semi-annually, in gold coin, and all interest, taxes, insurance and assessments; and if default should be made therein, then the whole debt was to become due in thirty days after October 1, 1873, and the mortgagee might then sell the property, on thirty days' notice, to pay the debt.

The loan was negotiated by Lombard to provide the necessary funds with which to erect a six-story and basement brick and stone building on the premises. Lombard proceeded in the erection of the building, covering the whole of the lots except the west thirty-five feet, which was not built upon, for the reason of the contemplated extension, by the city, of Dearborn street from Jackson street to Fourteenth street. The building was made with its main front on Dearborn street so to be extended and opened, and with a front also on Third avenue, which gave to the lots and buildings two fronts, one east on Third avenue and the other west on Dearborn street as proposed to be extended and opened.

Up to December 10, 1872, the walls of the building had been constructed, the roof put on, and the interior in part finished. On that day Lombard and wife sold and conveyed by warranty deed the whole of the premises with the building thereon, subject to this mortgage, to the National Life Insurance Company of Chicago, whereof Lombard was president and one of the principal stockholders, for the sum of $100,173, a part of which was in the assumption by the insurance company of this debt to the United States Mortgage Company, and as part of the purchase money the insurance company executed and delivered to Lombard their promissory note for $12,273, drawn to the order of that company and by the company indorsed in blank, payable three years after date with interest at ten per centum per annum, payable semi-annually, to secure the payment of which the insurance company, on the same day, executed and delivered to Josiah L. Lombard, as trustee, a deed of trust containing full covenants of warranty on the whole of the premises, which deed was duly recorded. This note, so made and indorsed by the insurance company, was pledged by Benjamin Lombard, as collateral, on a loan of $4500 borrowed by him of a bank in Chicago. This collateral was subsequently sold by the bank to J. L. Lombard, for $3200, and said J. L. Lombard afterwards sold it to one J. Gross, to whom it was delivered with only the indorsement of the insurance company upon it, for $5000, for which he executed his note to J. L. Lombard, and the note for $12,273 was thus owned by Gross; and no part of it having been paid, there was due upon it for principal and interest $16,159.45, at the date of the decree herein.

On June 1, 1874, the said National Life Insurance Company was duly adjudged a bankrupt, and one Kirk Hawes appointed assignee. No dividend has ever been paid to the creditors of the company, and the estate will pay but a small per cent of its indebtedness. Prior to this, Benjamin Lombard was declared a bankrupt and no assets are known to exist out of which to satisfy his creditors.

On March 17, 1873, the common council of the city of Chicago, in pursuance of law, passed an ordinance for the opening and extension of Dearborn street as above stated, the costs and expenses of which were to be paid for by special assessments upon the property along the line of such street specially benefited thereby. On the petition of the city to the Superior Court of Cook county praying for the condemnation of this thirty-five feet and to ascertain the compensation to which the owner would be entitled for taking the same, a jury was called, who found as compensation $10,952.73, and upon this finding a judgment was rendered by said court, and the same is in full force and in no part paid or satisfied.

These damages or compensation having to be paid by benefits to contiguous property, a commission was subsequently appointed by the Superior Court, on petition therefor, who adjudged the benefits to the remaining portion of these lots, by reason of this improvement, to be the sum of $15,897.84, and no appeal or writ of error was ever taken. No proceedings have been taken by the city to enforce these assessments, nor has it taken possession of any part of the premises on which to construct the street.

The National Life Insurance Company having become possessed of the legal title to these premises by the deed of Lombard and wife, Kirk Hawes, the assignee in bankruptcy of that company, exhibited his bill on the equity side of the Superior Court of Cook county, for the purpose of having the validity and priority of the liens on the premises adjudicated by a decree of court, and suits therefor consolidated, those of the mechanics and material-men being then pending, and the lots and building thereon sold, and the proceeds distributed and paid to those who might be found to be entitled thereto by decree of the court.

To this bill J. Gross was made a defendant, as also the United States Mortgage Company. Gross also filed a cross-bill, the object of which was to establish in himself a valid and first lien upon the premises under the trust deed and note executed by the National Life Insurance Company as above stated, and for the further purpose of having the mortgage of Benjamin Lombard to the United States Mortgage Company, under which that company claims a first lien, declared null and void, on the ground that said company is, and was at the time the mortgage was executed, a foreign corporation, organized under a law of the State of New York, and having its place of business there, and having no legal existence in this State, and could not take the title by mortgage or otherwise nor acquire any interest therein or valid title thereto.

To this cross-bill the United States Mortgage Company filed an answer, and also answered the bill of Hawes, setting out all the facts as above stated, and that $70,000 was due it for principal, interest, taxes, etc., and alleging default on the part of Lombard in paying interest, taxes, etc., and claiming the right to sell the property to pay the debt as stipulated in the mortgage, and claiming that in equity the damages awarded for taking the thirty-five feet ought to be set off, so far as they go, against the benefits. And they allege that Lombard and the National Life Insurance Company were insolvent when default was made in payment of interest due the mortgage company and when assessments of damages and benefits were made, and still are insolvent and their estates worth nothing.

The mechanics and material-men also filed answers and cross-bills claiming liens, and it was agreed that proper pleadings were filed by the several parties, whereby were properly put in issue the questions presented by the above facts.

A hearing was had on the bill of Hawes, cross-bills, answers, replications, and testimony taken in court, and it was ordered, adjudged and decreed that the United States Mortgage Company had the power to take the mortgage in question, and found that the mortgaged premises were not worth the amount due on said mortgage, together with the special assessments thereon, but decreed that said company, by the clause above recited in the mortgage, waived any benefit which might result to Benjamin Lombard, his grantees or assigns, and to any damages which might be adjudged against the city for taking the thirty-five feet of said premises. That by the subsequent conveyance of this property to the National Life Insurance Company, and the execution of the trust deed to Josiah L. Lombard by that company, to secure the note of $12,273, Gross, as the legal and equitable holder thereof, had a valid and first lien upon this thirty-five feet, and was entitled to all the proceeds arising out of the condemning the same, and entitled to the whole of the judgment against the city of Chicago for $10,952.73 and interest due thereon, and that the same should be paid to Gross.

The decree also found the liens of the mechanics and material-men valid and effectual. It further found that the lien created by the deed of trust of the National Life Insurance Company to Josiah L. Lombard was inferior to and subject to the lien of the United States Mortgage Company and to the several mechanics' liens as to the whole of the lots, except these thirty-five feet condemned for Dearborn street. That the lien of the United States Mortgage Company was prior and paramount to the several mechanics' liens to the extent of the value of the land at the time when the contract between Leach, who built the walls, and Benjamin Lombard was made, to-wit, September 11, 1872, and, to that extent, is to be preferred in the division of the proceeds arising from the sale of the premises.

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